iSuppli: OLED panel shortage a concern for Android smartphone makers

iSuppli: OLED panel shortage a concern for Android smartphone makers

Everyone wants an OLED display on their cellphone, right? Ok, maybe not everybody, especially when compared to regular AMOLED, but we certainly want, no demand, a 4-plus inch Super AMOLED on our next Android smartphone. Problem is, there just aren't enough to go around according to iSuppli. An issue compounded by the fact that Samsung, the world's largest AMOLED panel manufacturer, gets first crack at its displays in support of its massive growth plans for 2010, leaving companies like HTC to look elsewhere as we've already heard. That leaves LG, the only other source for small AMOLED panels, to shoulder the burden until the two can ramp up production, or until more players can enter the market. Samsung hopes to significantly boost production in 2012 when it brings a new $2.2 billion AMOLED facility on-line. Meanwhile, Taiwan-based AU Optronics and TPO Display Corp. plan to introduce AMOLED products by the end of 2010 or early 2011. Until then there's always the venerable LCD which will continue to dwarf AMOLED shipments for many years to come. See the numbers after the break.

Shipments of small-sized AMOLEDs used in cell phones and otherapplications are projected to reach 184.5 million units by 2014, upfrom 20.4 million units in 2009, for a Compound Annual Growth Rate(CAGR) of 55.1 percent during the period, according to a revisedforecast from iSuppli. While such growth is impressive, the AMOLEDshipments pale next to small-sized AMLCDs, which are forecasted torise to 1.75 billion units by 2014 from 1.3 billion in 2009.

The attached figure presents iSuppli's forecasts for both small-sizedAMLCDs and AMOLEDs from 2009 to 2014. iSuppli defines small-sizeddisplays as those having a diagonal dimension of 9-inches and smaller.

"Starting with the Nexus One introduced in January, Android-basedsmart phones have aggressively adopted high-quality AMOLED displays asa competitive differentiator against the advanced-technology AMLCDscreen used in the iPhone," said Vinita Jakhanwal, principal analystfor small and medium displays at iSuppli. "However, risingdemand-combined with a limited supply base-has led to the constrainedavailability of AMOLEDs."

SMD is investing $2.2 billion in its AMOLED facility by 2012 to rampup production, while shipments now are limited at LG as the companyhas yet to increase production. In addition to the South Koreanplayers, Taiwan-based AU Optronics Corp. and TPO Display Corp. areplanning to introduce AMOLED products at the end of 2010 or early2011, but both companies are not shipping any significant quantitiesat this time.

Given the small pool of available AMOLED suppliers, manufacturers ofvolume applications such as mobile handsets understandably areconcerned about the potential for disruptions in production if a partor component becomes delayed or ceases entirely. This is especiallytrue with a company like Samsung, which has special relationships withits own internal brand, giving it preferential treatment over outsidecustomers.

If the demand for AMOLEDs is so strong, why aren't other manufacturersbuilding production facilities and starting production more rapidly?

First, AMOLED is a newer technology compared to the well-establishedAMLCD, whose fabs are mature and mostly depreciated in full. Thiscurrently gives AMLCD fixed-cost advantages compared to AMOLED fabsthat have been around only for the last few years. Second, newertechnology means that establishing manufacturing processes could beprone to yield losses, leading to slower production ramp-ups. Third,with AMLCD improving its performance and simultaneously exertingpressure on display prices, competing with the moving performance

as well as price target of LCDs not only is challenging for a newtechnology like AMOLED but also delays return on large investments.

Korean initiatives in play

With Samsung and LG spearheading the development of AMOLED, what thetwo companies do will determine whether the technology moves beyondits current niche status into a position in which the technologybecomes a viable competitor for mobile handset displays.

To increase supply, Samsung is heavily investing in AMOLED and plansto have an additional Gen 5.5 fab up and running at the end of 2011.For its part, LG is starting a new Gen 4.5 fab that will manufactureboth LTPS and AMOLED panels.

Overall, handset makers are pushing to make displays available inmass-volume production from AMOLED suppliers. In a market that isbecoming highly competitive with a perceptible emphasis on distinctivefeatures and improved performance, AMOLED may offer manufacturerscrucial and much needed choices with which they can achieve productdifferentiation.